<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
(Insurance Management Solutions Group, Inc. Logo)
360 CENTRAL AVENUE
ST. PETERSBURG, FLORIDA 33701
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 1, 2000
---------------------
To the Shareholders of Insurance Management Solutions Group, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting") of Insurance Management Solutions Group, Inc. (the "Company") will be
held at the Company's offices at 360 Central Avenue, St. Petersburg, Florida, on
Thursday, June 1, 2000 at 10:00 a.m. Eastern Standard Time for the following
purposes:
1. To elect three directors to hold office until the 2003 Annual
Meeting of Shareholders and until each of their respective successors is
duly elected and qualified and to elect one director to hold office until
the 2001 Annual Meeting of Shareholders and until his successor is duly
elected and qualified; and
2. To transact any other business as may properly come before the
Annual Meeting.
Shareholders of record as of the close of business on March 31, 2000 will
be entitled to vote at the Annual Meeting or any adjournment or postponement
thereof. Information relating to the matters to be considered and voted on at
the Annual Meeting is set forth in the proxy statement accompanying this Notice.
By Order of the Board of Directors,
Christopher P. Breakiron
Secretary
April 24, 2000
YOUR VOTE IS IMPORTANT. TO ASSURE YOUR REPRESENTATION
AT THE ANNUAL MEETING, PLEASE VOTE ON THE MATTERS TO BE CONSIDERED
AT THE ANNUAL MEETING BY COMPLETING THE ENCLOSED PROXY AND MAILING
IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE> 3
(INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. LOGO)
360 CENTRAL AVENUE
ST. PETERSBURG, FLORIDA 33701
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Insurance Management Solutions
Group, Inc. (the "Company") for the Annual Meeting of Shareholders (the "Annual
Meeting") to be held at the Company's offices at 360 Central Avenue, St.
Petersburg, Florida on Thursday, June 1, 2000 at 10:00 a.m. Eastern Standard
Time, or any adjournment thereof.
If the accompanying proxy form ("Proxy") is completed, signed and returned,
the shares represented thereby will be voted at the Annual Meeting. The giving
of the Proxy does not affect the right to vote in person should the shareholder
be able to attend the Annual Meeting. The shareholder may revoke the Proxy at
any time prior to the voting thereof.
The Company's Annual Report on Form 10-K for the year ended December 31,
1999 ("Fiscal 1999"), together with this Proxy Statement and the Proxy, are
first being mailed on or about April 24, 2000 to shareholders entitled to vote
at the Annual Meeting.
SHAREHOLDERS ENTITLED TO VOTE
Shareholders of record as of the close of business on March 31, 2000 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. At
that date, there were 12,800,261 shares of Common Stock, $0.01 par value per
share ("Common Stock"), outstanding and entitled to vote. Each outstanding share
of Common Stock is entitled to one vote on all matters submitted to a vote of
shareholders.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the inspector of elections appointed for the Annual Meeting, who will also
determine whether a quorum is present for the transaction of business. The
Company's Amended and Restated Bylaws provide that a quorum is present if the
holders of a majority of the issued and outstanding shares of Common Stock
entitled to vote at the meeting are present in person or represented by proxy.
Abstentions will be counted as shares that are present and entitled to vote for
purposes of determining whether a quorum is present. Shares held by nominees for
beneficial owners will also be counted for purposes of determining whether a
quorum is present if the nominee has the discretion to vote on at least one of
the matters presented, even though the nominee may not exercise discretionary
voting power with respect to other matters and even though voting instructions
have not been received from the beneficial owner (a "broker non-vote"). Neither
abstentions nor broker non-votes are counted in determining whether a proposal
has been approved.
Under Florida law, if a quorum exists, directors are elected by a plurality
of the votes cast by the shares entitled to vote in the election.
Shareholders are requested to vote by completing the enclosed Proxy and
returning it signed and dated in the enclosed postage-paid envelope.
Shareholders are urged to indicate their votes in the spaces provided on the
Proxy. Proxies solicited by the Board of Directors of the Company will be voted
in accordance with the directions given therein. Where no instructions are
indicated, signed Proxies will be voted FOR each nominee named in the Notice of
Annual Meeting of Shareholders which is set forth more completely herein.
Returning
<PAGE> 4
your completed Proxy will not prevent you from voting in person at the Annual
Meeting should you be present and wish to do so.
Any shareholder giving a Proxy has the power to revoke it at any time
before it is exercised by: (i) filing with the Secretary of the Company written
notice thereof; (ii) submitting a duly executed Proxy bearing a later date; or
(iii) appearing at the Annual Meeting and giving the Secretary notice of his or
her intention to vote in person. Proxies solicited hereby may be exercised only
at the Annual Meeting and any adjournment thereof and will not be used for any
other meeting. Proxies solicited hereby will be returned to the Board of
Directors and will be tabulated by the inspector of elections designated by the
Board of Directors, who will not be employed by the Company or any of its
affiliates.
The cost of solicitation of Proxies by mail on behalf of the Board of
Directors will be borne by the Company. Proxies also may be solicited by
personal interview or by telephone, in addition to the use of the mails, by
directors, officers and regular employees of the Company without additional
compensation therefor. The Company also has made arrangements with brokerage
firms, banks, nominees and other fiduciaries to forward proxy solicitation
materials for shares of Common Stock held of record to the beneficial owners of
such shares. The Company will reimburse such record holders for their reasonable
out-of-pocket expenses.
ITEM 1. ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THE FOLLOWING NOMINEES FOR ELECTION AS
DIRECTORS AND URGES EACH SHAREHOLDER TO VOTE "FOR" THE NOMINEES. PROXIES IN THE
ACCOMPANYING FORM WILL BE VOTED AT THE ANNUAL MEETING, UNLESS AUTHORITY TO DO SO
IS WITHHELD, IN FAVOR OF THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED BELOW.
The Company's Board of Directors consists of nine members divided into
three classes, with the members of each class serving three-year terms expiring
at the third annual meeting of shareholders after their election. Three
directors are to be elected at the Annual Meeting to hold office for a term of
three years expiring at the 2003 Annual Meeting of Shareholders, and until each
of their respective successors shall have been duly elected and qualified.
Additionally, another director was appointed by the Company's Board of Directors
to fill the vacancy created by the increase in the size of the Board from nine
to ten members. (Subsequent to such time, another director resigned, and
accordingly, the Board of Directors was reduced in size from ten to nine
members.) Pursuant to Florida law, the term of a director appointed to fill a
vacancy expires at the next shareholders' meeting at which directors are
elected. This director is to be elected at the Annual Meeting for a term of one
year expiring at the 2001 Annual Meeting of Shareholders, and until his
successor shall have been duly elected and qualified. In the event any of the
foregoing nominees is unable to serve, the persons designated as proxies will
cast votes for such other person in their discretion as a substitute nominee.
The Board of Directors has no reason to believe that the nominees named below
will be unavailable or, if elected, will decline to serve.
Certain information is set forth below for the nominees for directors, as
well as for each director whose term of office will continue after the Annual
Meeting.
NOMINEES FOR DIRECTORS -- TERM TO EXPIRE 2003
ROBERT M. MENKE
Mr. Menke, age 66, has served as a Director of the Company since December,
1996. Mr. Menke founded Bankers Insurance Group, Inc. ("BIG"), a holding company
chartered in Florida and the Company's principal shareholder, in 1976 and has
been its Chairman of the Board since 1979. He was honored as "Insurance Man Of
The Year" in 1986 by the Florida Association of Domestic Insurance Companies.
Mr. Menke is also a member of the Florida Insurance Council. Mr. Menke is
currently Chairman of the Board of various direct and indirect subsidiaries of
BIG, including Bankers Insurance Company ("BIC"), Bankers Security Insurance
Company ("BSIC"), First Community Insurance Company ("FCIC"), and Bankers Life
2
<PAGE> 5
Insurance Company ("BLIC"), all affiliates of BIG and the Company. He is also a
director of the Florida Windstorm Association and First Community Bank of
America.
WILLIAM D. HUSSEY
Mr. Hussey, age 66, has served as a Director of the Company since December,
1996. Mr. Hussey is a retired President and Chief Executive Officer of the
Florida League of Financial Institutions and is an advisor with the Florida
Bankers Association.
E. RAY SOLOMON, PH.D., CLU
Dr. Solomon, age 70, has served as a Director of the Company since
December, 1996. Dr. Solomon is a retired Professor and the former Dean of the
School of Business at Florida State University.
NOMINEE FOR DIRECTOR -- TERM TO EXPIRE 2001
DAVID M. HOWARD
Mr. Howard, age 38, has served as President of the Company since August,
1999, and as Chief Executive Officer of the Company since January, 2000. Prior
to joining the Company, he spent eleven years with BIG. From October 31, 1998
until assuming his duties with the Company, Mr. Howard served as Senior Vice
President of each of BIG's insurance subsidiaries, namely BIC, BSIC, FCIC and
BLIC. From October, 1996 until assuming his duties with the Company, he also
served as Senior Vice President of BIG and President of Bankers Insurance
Services, Inc., a subsidiary of BIG. Mr. Howard served as President of Bankers
Hazard Determination Services, Inc., the flood zone determination services
subsidiary of the Company that was merged into its Geotrac of America, Inc.
("Geotrac") subsidiary, from October, 1995 to July, 1998, and as Executive Vice
President of Bankers Insurance Services, Inc. from December, 1991 to October,
1996. He also has served as a director of Geotrac since July, 1998. Prior to
joining BIG, Mr. Howard spent several years as an officer in the United States
military. He is active in industry organizations and is a member of the Council
of Company Executive Officers.
DIRECTORS CONTINUING IN OFFICE -- TERMS TO EXPIRE 2001
ROBERT G. MENKE
Mr. Menke, age 38, has served as a Director of the Company since December,
1996. Mr. Menke, the son of Robert M. Menke, joined BIG in 1985 and has held
positions as programmer, systems analyst, systems manager, manager of
information services, and Vice President and Senior Vice President of Corporate
Services. He is currently President of BIG and has served in such capacity since
October, 1999. From October, 1997 to October, 1999 Mr. Menke served as Executive
Vice President of BIG. Mr. Menke also serves as President (or, in the case of
BLIC, Vice Chairman), Chief Operating Officer and a Director of various direct
and indirect subsidiaries of BIG, including BIC, BSIC, FCIC and BLIC.
ALEJANDRO M. SANCHEZ
Mr. Sanchez, age 42, has served as a Director of the Company since July,
1998. Mr. Sanchez is Chief Executive Officer of the Florida Bankers Association
and has served in such capacity since February, 1998. From November, 1993 to
January, 1998, he served as Vice President for Government Affairs of the Florida
Bankers Association. He previously served as Senior Corporate Attorney for GTE
Information Services in Tampa, Florida.
3
<PAGE> 6
DIRECTORS CONTINUING IN OFFICE -- TERMS TO EXPIRE 2002
DAVID K. MEEHAN
Mr. Meehan, age 53, has served as the Chairman of the Board and a Director
of the Company since December, 1996. He also served as President and Chief
Executive Officer of the Company from December, 1996 to August, 1999 and
January, 2000, respectively. Mr. Meehan joined BIG in 1976 as Corporate
Secretary. He was appointed President of BIG in 1979 and served in such capacity
until February, 1999. He is currently Vice Chairman of the Board of BIG. Mr.
Meehan is also Vice Chairman of various direct and indirect subsidiaries of BIG,
including BIC, BSIC, FCIC and BLIC. Mr. Meehan has served on the Board of
Governors of each of the Florida Joint Underwriting Association, the Florida
Property and Casualty Joint Underwriting Association and the Florida Residential
Property and Casualty Joint Underwriting Association. Mr. Meehan is
Director/Vice Chairman of the Florida Insurance Council and past Chairman and
President of the Florida Association of Domestic Insurance Companies. In 1999,
Mr. Meehan was appointed as a commissioner of the Florida Fish and Wildlife
Conservation Commission.
DANIEL J. WHITE
Mr. White, age 50, has served as a Director of the Company since May, 1998.
Mr. White founded the original predecessor to Geotrac in 1987. He has served as
President of Geotrac (and its predecessors) since that time and as Chief
Executive Officer of Geotrac (and its predecessors) since September, 1994. Mr.
White also currently serves as a director of Independent Community Bank Corp.
JOHN A. GRANT, JR.
Mr. Grant, age 56, has served as a Director of the Company since December,
1996. Mr. Grant has been a partner with the St. Petersburg, Florida-based law
firm of Harris, Barrett, Mann and Dew since 1989. Since 1986, he has also been a
member of the Florida State Senate, where he currently serves as Chairman of the
Judiciary Committee and where he previously served as the Chairman of the
Banking & Insurance, Commerce, Criminal Justice, Education, and Government
Reform committees. He was a former Advisory Board Member of the United States
Small Business Administration and served on the Graduate Fellows Board of the
United States Department of Education.
BOARD OF DIRECTORS
GENERAL
The Board of Directors held six meetings during the year ended December 31,
1999. The Board of Directors also took certain actions by unanimous written
consent in lieu of a meeting, as permitted by Florida law. All of the current
directors attended at least 75% of the meetings of the Board of Directors held
during the respective periods that they served in such capacity during the year
ended December 31, 1999.
DIRECTOR COMPENSATION
Directors who are executive officers of the Company receive no compensation
for service as members of either the Board of Directors or committees thereof.
Directors who are not executive officers of the Company receive $1,000 for each
Board meeting attended and $150 ($200 in the case of a committee chairperson)
per committee meeting attended, plus reimbursement of reasonable expenses. The
outside directors are also eligible to receive options to purchase Common Stock
under the Company's Non-Employee Directors' Stock Option Plan. See "Executive
Compensation -- Stock Option Plans."
4
<PAGE> 7
COMMITTEES OF THE BOARD
The Board of Directors has established committees whose responsibilities
are summarized below. The Audit Committee, Compensation Committee, Executive
Committee and Marketing Committee held four, two, four and no meetings,
respectively, during the year ended December 31, 1999. All of the current
directors serving as members of such committees attended at least 75% of all
meetings of such committees during the respective periods that they served in
such capacities during the year ended December 31, 1999.
Audit Committee. The Audit Committee is comprised of Messrs. Solomon
(Chairman), Hussey (Vice Chairman) and Grant and is responsible for reviewing
the independence, qualifications and activities of the Company's independent
certified public accountants and the Company's financial policies, control
procedures and accounting staff. The Audit Committee recommends to the Board the
appointment of the independent certified public accountants and reviews and
approves the Company's financial statements. The Audit Committee is also
responsible for the review of transactions between the Company and any Company
officer, director or entity in which a Company officer or director has a
material interest.
Compensation Committee. The Compensation Committee is comprised of Messrs.
Solomon (Chairman), Hussey (Vice Chairman) and Grant and is responsible for
establishing the compensation of the Company's directors, officers and other
managerial personnel, including salaries, bonuses, termination arrangements, and
other executive officer benefits. In addition, the Compensation Committee is
responsible for the administration of the Company's Long Term Incentive Plan,
including the recipients, amounts and terms of stock option grants thereunder,
and the Company's Non-Qualified Stock Option Plan.
Marketing Committee. The Marketing Committee is comprised of Messrs.
Meehan, Howard, Robert M. Menke, Robert G. Menke and Sanchez and is responsible
for establishing the marketing policy of the Company and providing overall
supervision of its marketing efforts.
Executive Committee. The Executive Committee is comprised of Messrs.
Meehan (Chairman), Robert M. Menke (Vice Chairman), Robert G. Menke, Howard and
Grant. The Executive Committee, to the fullest extent allowed by the Florida
Business Corporation Act (the "FBCA"), and subject to the powers and authority
delegated to the Audit Committee, the Compensation Committee and the Marketing
Committee, has and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Company during
intervals between meetings of the Board of Directors. Pursuant to the FBCA, the
Executive Committee shall not have the authority to, among other things: approve
actions requiring shareholder approval, such as the sale of all or substantially
all of the Company's assets; fill vacancies on the Board or any committee
thereof; adopt, repeal or amend the Company's Bylaws; or, subject to certain
exceptions, reacquire or issue shares of the Company's capital stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During the year ended December 31, 1999, the executive officers and
directors of the Company filed with the Securities and Exchange Commission (the
"Commission") on a timely basis all required reports relating to transactions
involving equity securities of the Company beneficially owned by them. The
Company has relied on the written representation of its executive officers and
directors and/or copies of the reports they have filed with the Commission in
providing this information.
5
<PAGE> 8
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of the Record Date, with respect to: (i) each of
the Company's directors; (ii) each of the Company's executive officers named in
the Summary Compensation Table below; (iii) all directors and executive officers
of the Company as a group; and (iv) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock. Except as
otherwise indicated, each of the shareholders listed below has sole voting and
investment power over the shares beneficially owned.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
-------------------
NAME SHARES PERCENT
---- --------- -------
<S> <C> <C>
Bankers Insurance Group, Inc.(1)............................ 8,024,900 62.7%
Western International Insurance Company(2).................. 700,000 5.5
David M. Howard............................................. 10,000 *
Christopher P. Breakiron(3)................................. 400 *
David K. Meehan............................................. 2,200 *
Daniel J. White(4).......................................... 524,198 4.1
Robert M. Menke(5).......................................... 32,000 *
Robert G. Menke............................................. 3,200 *
John A. Grant, Jr........................................... 17,500 *
William D. Hussey........................................... 5,000 *
E. Ray Solomon.............................................. 4,000 *
Alejandro M. Sanchez........................................ 1,000 *
All directors and executive officers as a group (11
persons)(5)............................................... 600,698 4.7
</TABLE>
- ---------------
* Less than 1%.
(1) Includes 1,131,429 shares held by Bankers Insurance Group, Inc. ("BIG"),
3,453,471 shares held by Bankers Insurance Corporation ("BIC") and 3,440,000
shares held by Bankers Security Insurance Company ("BSIC"). The business
addresses of BIG, BIC and BSIC are all 360 Central Avenue, St. Petersburg,
Florida 33701. BIG is an indirect subsidiary of Bankers International
Financial Corporation, Ltd. ("BIFC"), a Cayman Islands corporation wholly
owned by Bankers International Financial Corporation II Trust, a
discretionary charitable trust. The sole trustee of this trust is Ansbacher
(Cayman) Limited, a Cayman Island corporation unaffiliated with BIG, the
Company or their respective officers or directors. Pursuant to the trust's
declaration of trust, Independent Foundation for the Pursuit of Charitable
Endeavors, Ltd., a not for profit Cayman Islands corporation ("IFPCE"),
possesses the discretionary power to (i) direct the trustee to appoint the
trust fund to another trust for the benefit of one or more of the
beneficiaries of the trust and (ii) remove the trustee and appoint one or
more new trustees outside the Cayman Islands. A majority vote of the
directors of IFPCE is required to take either of these actions. The Articles
of Association of IFPCE provide that the Board of Directors shall consist of
seven members, three of whom shall be the top three executives of Bankers
International Financial Corporation, a Florida corporation and subsidiary of
BIFC, three of whom shall be Mr. Robert M. Menke and his lineal descendants,
and one of whom shall be a director elected by a majority vote of the
remaining six directors (or, if they cannot agree, appointed by a court of
competent jurisdiction). Until his death or adjudication of incompetency,
Robert M. Menke shall have five votes and all other directors shall have one
vote, and Robert M. Menke's presence at a meeting shall be required for a
quorum. As of the Record Date, the directors of IFPCE included David K.
Meehan, Robert M. Menke and Robert G. Menke.
(2) Western International Insurance Company ("WIIC") is a wholly-owned
subsidiary of Venture Capital Corporation ("VCC"). The business address of
VCC and WIIC is Bank America Building, Fort Street, Georgetown, Grand
Cayman, British West Indies. VCC is a Cayman Island corporation wholly-owned
by Venture II Trust, a discretionary charitable trust. The sole trustee of
this trust is Cayman National Trust Company Limited, a Cayman bank
unaffiliated with BIG, the Company or their respective officers or
directors. Pursuant to the trust's declaration of trust, IFPCE possesses the
same discretionary powers as described in Note (1) above.
(3) Represents shares held jointly with spouse.
(4) Includes 262,099 shares held in trust by his spouse.
(5) Excludes 1,131,429 shares held by BIG, 3,453,471 shares held by BIC,
3,440,000 shares held by BSIC and 700,000 shares held by WIIC. See Notes (1)
and (2) above.
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<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning compensation
paid to or earned by the Company's Chairman of the Board and Chief Executive
Officer and each of the Company's five other current or former executive
officers for the years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-------------------------------------------------------------
OTHER
ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) COMPENSATION(3)
- --------------------------- ---- -------- ------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
David K. Meehan.................. 1999 $148,893 $32,000 -- $6,587
Chairman of the Board and 1998 239,092 32,000 -- 8,978
former President and 1997 221,000 59,000 -- 9,000
Chief Executive Officer(4)
David M. Howard.................. 1999 71,094 50,000 -- 2,659
Current President and 1998 -- -- -- --
Chief Executive Officer(5) 1997 -- -- -- --
Jeffrey S. Bragg................. 1999 160,468 25,000 -- 5,728
Former Executive Vice President 1998 156,552 25,000 -- 5,714
and Chief Operating Officer(6) 1997 84,806 10,000 -- --
Christopher P. Breakiron......... 1999 97,806 15,000 -- 4,512
Current Chief Financial
Officer, 1998 -- -- -- --
Secretary and Treasurer(7) 1997 -- -- --
Kathleen M. Batson............... 1999 130,556 15,000 -- 5,822
Former Executive Vice 1998 124,010 15,000 6,718
President(8) 1997 -- -- --
Kelly K. King.................... 1999 226,824 20,000 -- 4,482
Former Senior Vice President, 1998 117,390 15,000 -- 7,094
Treasurer, Chief Financial 1997 56,151 7,500 -- 3,909
Officer and Secretary(9)
Daniel J. White.................. 1999 150,000 -- -- 5,714
President and Chief Executive 1998 66,050 -- -- 1,044
Officer of Geotrac(10) 1997 -- -- -- --
</TABLE>
- ---------------
(1) During the year ended December 31, 1997, and the year ended December 31,
1999, certain of the executive officers of the Company were also executive
officers or employees of BIG, and, in certain instances, BIG paid a portion
of their respective compensation. The amounts reflected in the table above
for such year were all paid to the respective executive officers by the
Company. David K. Meehan was the only executive officer of the Company who
was paid in excess of $100,000 by the Company in 1997. During the year
ended December 31, 1998, all of the executive officers of the Company spent
substantially all of their time on the Company's business and were
compensated solely by the Company. During the year ended December 31, 1999,
all of the executive officers of the Company spent substantially all of
their time on the Company's business and were compensated solely by the
Company except that subsequent to August 19, 1999 Mr. Meehan spent 70% of
his time on BIG's business and was paid $96,312 by BIG for his service as
an executive officer of BIG during the year ended December 31, 1999.
(2) Does not include the value of the perquisites provided to certain of the
named executive officers which in the aggregate did not exceed 10% of such
officer's salary and bonus. Also excludes benefits, if any, accruing to
Messrs. Meehan, Bragg and King and Mrs. Batson under the Executive Phantom
Stock Plan of Bankers Financial Corporation, the parent of BIG. No officers
or directors of the Company (with the exception of Robert M. Menke and
Robert G. Menke) are eligible to receive additional grants under such
Phantom Stock Plan. The Company did not grant any options, restricted stock
or other long-term incentive compensation to its executive officers during
either 1997 or 1998.
(3) Reflects matching amounts paid by the Company under its 401(k) plan for the
year indicated.
(4) Effective August 19, 1999, Mr. Meehan was succeeded by Mr. Howard as
President of the Company. Prior to such time, Mr. Meehan's annual base
salary was $258,000. Effective August 19, 1999 his annual base salary was
reduced
7
<PAGE> 10
to $75,000 per year for his services as Chairman of the Board of the
Company. Mr. Meehan did not receive any cash compensation from BIG during
the year ended December 31, 1997. During such year, Mr. Meehan spent a
majority of his time on the Company's business.
(5) Mr. Howard became the President of the Company on August 19, 1999 and such
amounts include compensation only from such time.
(6) Mr. Bragg joined the Company in May, 1997. He did not receive any cash
compensation from BIG during the year ended December 31, 1997. Mr. Bragg
resigned as Executive Vice President, Chief Operating Officer and a
Director of the Company on January 11, 2000.
(7) Mr. Breakiron became the Chief Financial Officer, Secretary and Treasurer
of the Company on August 24, 1999. Prior to such time Mr. Breakiron served
as Vice President and Controller of the Company. Accordingly, the amounts
shown include all compensation received from the Company for the year ended
December 31, 1999.
(8) On August 24, 1999, Ms. Batson resigned her position as Senior Vice
President of the Company in order to assume the position of President of
IMS Direct, a wholly-owned subsidiary of the Company. Excludes $111,000 in
salary and $15,000 in bonus paid to Ms. Batson for her service as an
executive officer of BIG during the year ended December 31, 1997. During
such year, Ms. Batson spent less than one-half of her time on the Company's
business.
(9) On August 24, 1999, Mr. King resigned as Senior Vice President, Chief
Financial Officer, Secretary and Treasurer of the Company. Includes
$132,923 paid in 1999 in connection with Mr. King's Release and Separation
Agreement dated August 24, 1999. Excludes $56,151 in salary and $7,500 in
bonus paid to Mr. King by BIG for his service as an executive officer of
BIG during the year ended December 31, 1997. During such year, Mr. King
spent approximately one-half of his time on the Company's business.
(10) Mr. White did not join the Company as an officer until the consummation of
the acquisition of Geotrac's predecessor in July, 1998.
The following table sets forth information as to stock options granted to
the executive officers named in the Summary Compensation Table during the fiscal
year ended December 31, 1999. These options were granted under the Company's
Long-Term Incentive Plan and provide for vesting of 60% after three years, 20%
after four years and 20% after five years from the date of grant. Options were
granted at exercise prices of not less than the fair market value of the Common
Stock on the date of grant. The amounts under "Potential Realizable Value at
Assumed Annual Rate of Stock Price Appreciation for Option Term" represent the
hypothetical gains of the options granted based on assumed annual compound stock
appreciation rates of 5% and 10% over their exercise price for the full
seven-year term of the options. The assumed rates of appreciation are mandated
by the rules of the Commission and do not represent the Company's estimate or
projection of future Common Stock prices.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATE OF STOCK
SECURITIES OPTIONS/SARs PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% 10%
---- ----------- ---------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
David K. Meehan............... 60,000 9.30% $11.00 02/08/06 $268,686 $626,153
David M. Howard............... 60,000 9.30 7.67 08/14/06 187,348 436,600
Jeffrey S. Bragg.............. 50,000 7.75 11.00 02/08/06 223,905 521,794
Christopher P. Breakiron...... 5,000 0.77 11.00 02/08/06 22,391 52,179
20,000 3.10 11.00 05/23/06 89,562 208,718
Kathleen M. Batson............ 35,000 5.42 11.00 02/08/06 156,734 365,256
Kelly K. King................. 35,000 5.42 11.00 02/08/06 156,734 365,256
Daniel J. White............... 25,000 3.87 11.00 02/08/06 111,953 260,897
</TABLE>
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<PAGE> 11
The following table sets forth information with respect to aggregate stock
option exercises by the executive officers named in the Summary Compensation
Table during 1999 and the year-end value of unexercised options held by such
executive officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTIONS/SAR VALUE TABLE
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF OPTIONS/SARs AT
NUMBER OF UNEXERCISED FY-END ($)*
SHARES ACQUIRED VALUE OPTIONS/SARs ---------------------------
NAME ON EXERCISE REALIZED ($) AT FY-END (#) EXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
David K. Meehan.................. -- -- 25,000 -- --
David M. Howard.................. -- -- 60,000 -- --
Jeffrey S. Bragg................. -- -- -- -- --
Christopher P. Breakiron......... -- -- 25,000 -- --
Kathleen M. Batson............... -- -- 35,000 -- --
Kelly K. King.................... -- -- -- -- --
Daniel J. White.................. -- -- 25,000 -- --
</TABLE>
- ---------------
* Based on the average high and low sales prices of the Company's Common Stock
on December 31, 1999 as quoted on The Nasdaq Stock Market.
EMPLOYMENT AGREEMENTS
Effective as of the completion of its initial public offering in February,
1999, the Company entered into an employment agreement with Mr. Meehan pursuant
to which he was originally paid an annual base salary of $258,000. Effective
August 19, 1999 Mr. Meehan resigned as President of the Company and his annual
base salary was reduced to $75,000 for his services as Chief Executive Officer
and Chairman. (In January, 2000, he also resigned as Chief Executive Officer of
the Company.) Mr. Meehan's Employment Agreement provides for an initial term of
three years, subject to automatic continuation until terminated by either party.
Mr. Meehan's Employment Agreement further provides that, if he is terminated by
the Company without cause (as defined therein), he shall be entitled to
severance payments, payable in accordance with the Company's usual payroll
practices, equal to his then current annual base salary. In the event Mr. Meehan
secures employment during the twelve months following termination, then the
Company shall be entitled to a credit against its obligation to make severance
payments in the amount of 75% of the base salary paid to him by his new employer
during the twelve-month period following termination by the Company.
Mr. Meehan's Employment Agreement provides that he shall be provided
benefits, such as health, life and disability insurance, on the same basis as
the Company's other employees. In addition, to the extent authorized by the
Board of Directors, Mr. Meehan also shall be entitled to participate in the
Company's bonus, stock option and other plans, if any. Mr. Meehan's agreement
further provides that, during the term of the agreement and for a period of two
years thereafter, Mr. Meehan will not, directly or indirectly, compete with the
Company by engaging in certain proscribed activities.
In connection with the acquisition of Geotrac's predecessor in July, 1998,
Geotrac entered into an employment agreement with Daniel J. White pursuant to
which Mr. White continues to serve as President and Chief Executive Officer of
Geotrac. This agreement provides for an initial term of four years and shall
continue in effect thereafter until terminated by either party upon 90 days
prior written notice. Mr. White's current annual base salary is $150,000,
subject to annual review by Geotrac's board of directors. To the extent
authorized by Geotrac's board of directors, Mr. White shall be entitled to
participate in any bonus programs established by Geotrac. Mr. White shall also
be entitled to comparable benefits, including health, life and disability
insurance, as are offered to any of Geotrac's other executive officers. In the
event of Mr. White's death or disability, Geotrac's obligations under the
agreement will automatically terminate, except that Mr. White shall be entitled
to severance equal to one times his then current annual base salary. The
agreement
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<PAGE> 12
further provides that, in the event of termination by Geotrac without cause (as
defined therein) or by Mr. White for good reason (as defined therein), or in the
event the agreement is not renewed for any reason other than death, disability
or for cause, then Geotrac shall pay Mr. White at the rate of his annual base
salary then in effect for the longer of (i) the remainder of the term of the
agreement and (ii) one year after such termination date, subject to a credit of
up to 75% of the base salary paid to Mr. White by his new employer, if any.
This agreement also provides that, for a period of two years following Mr.
White's termination of employment other than by Mr. White for good reason or by
Geotrac without cause, Mr. White will not, directly or indirectly, engage (or
have an interest) in the flood zone compliance business nor in any other
business engaged or planned to be engaged in by Geotrac within any state or
country in which Geotrac is doing or plans to do business. Finally, the
agreement provides that, during the term of the agreement and for a period of
two years thereafter, Mr. White will not, directly or indirectly, employ,
attempt to employ, or solicit for employment, any of Geotrac's employees.
Both Messrs. Jeffrey S. Bragg and Kelly K. King had Employment Agreements
substantially similar to Mr. Meehan's. Effective upon their respective
departures from the Company, Messrs. Bragg and King entered into separate
Release and Separation Agreements with the Company. These agreements contain
certain confidentiality provisions. Pursuant to Mr. King's Release and
Separation Agreement, the Company will pay Mr. King a total of $180,000 over the
one-year period following his resignation. Pursuant to Mr. Bragg's Release and
Separation Agreement, the Company entered into a Consulting Agreement with Mr.
Bragg under which the Company will pay Mr. Bragg $92,262, even if he obtains
other employment and is unable to continue to render such services. The
Consulting Agreement also contains certain limited non-compete covenants.
STOCK OPTION PLANS
The Company currently maintains two stock option plans to attract, motivate
and retain key employees and members of the Board of Directors who are not
employees of the Company.
Long Term Incentive Plan. The Company currently maintains a Long Term
Incentive Plan (the "Incentive Plan") to attract, retain and motivate
participating employees of the Company and its subsidiaries through awards of
shares of Common Stock, options to purchase shares of Common Stock and stock
appreciation rights ("SARs"). A total of 875,000 shares of Common Stock may be
issued pursuant to the Incentive Plan. The Incentive Plan has been approved by
the Company's Board of Directors and shareholders.
The Incentive Plan provides for the grant of incentive or nonqualified
stock options to purchase shares of Common Stock. In February, 1999, the
executive officers of the Company were granted options to purchase a total of
205,000 shares of Common stock at $11.00 per share as follows: David K. Meehan,
60,000 shares; Jeffrey S. Bragg, 50,000 shares; Kathleen M. Batson, 35,000
shares; Kelly K. King, 35,000 shares; and Daniel J. White, 25,000 shares. To
date, all employees of the Company as a group, including these executive
officers, have been granted options to purchase a total of 522,500 shares of
Common Stock at $11.00 per share. All of such options expire on the seventh
anniversary of the date of grant. Options shall become exercisable 60% after
three years, 20% after four years and 20% after five years. The Options
previously granted to Messrs. Bragg and King were not vested prior to their
departure from the Company and, accordingly, such options were canceled. The
Incentive Plan is administered by the Compensation Committee of the Board of
Directors.
Non-Employee Directors' Stock Option Plan. The Company also maintains a
Non-Employee Directors' Stock Option Plan (the "Non-Employee Director Plan") to
secure for the Company and its shareholders the benefits of the incentive
inherent in increased Common Stock ownership by the members of the Company's
Board of Directors who are not employees of the Company. The Non-Employee
Director Plan has been approved by the Company's Board of Directors and
shareholders.
The Non-Employee Director Plan provides for the grant of nonqualified stock
options to purchase up to 7,200 shares of Common Stock in any three-year period
to members of the Board of Directors who are not
10
<PAGE> 13
employees of the Company. A total of 200,000 shares of Common Stock may be
issued pursuant to this plan. In February, 1999, each non-employee director was
granted options to purchase 6,000 shares of Common Stock at $11.00 per share.
Non-employee directors receiving such options will become vested in options for
the purchase of 800 shares of Common Stock after the adjournment of each annual
meeting of shareholders of the Company, to the extent he or she has been granted
options that have not yet vested, and provided that he or she is then a
non-employee director of the Company. In addition, each non-employee director
shall become vested in options for the purchase of 400 shares of Common Stock
upon the adjournment of each regularly scheduled quarterly meeting of the Board
of Directors (other than following the annual meeting of shareholders), to the
extent he or she has been granted options that have not yet vested, and provided
that he or she is then a non-employee director of the Company. Notwithstanding
the foregoing, neither Robert M. Menke nor Robert G. Menke will be granted any
option grants under the Non-Employee Director Plan. All options granted will
have an exercise price equal to the fair market value of the Common Stock as of
the date of grant, will become exercisable upon vesting, and will expire on the
sixth anniversary of the date of grant. The Non-Employee Director Plan is a
formula plan and accordingly is intended to be self-governing. To the extent
that questions of interpretation arise, they will be resolved by the Board of
Directors.
Non-Qualified Stock Option Grants. The Company's Board of Directors and
shareholders also have adopted a Non-Qualified Stock Option Plan (the
"Non-Qualified Plan"), pursuant to which non-qualified stock options to purchase
125,000 shares of Common Stock at a price per share of $11.00 were granted in
conjunction with the February, 1999 initial public offering to certain executive
officers of BIG, including options to purchase 25,000 shares each to Messrs.
Robert M. Menke and Robert G. Menke, directors of the Company. All of such
options expire on February 10, 2006, the seventh anniversary of the date of
grant. Options shall become exercisable 60% after three years, 20% after four
years and 20% after five years. The Non-Qualified Plan is administered by the
Compensation Committee of the Board of Directors of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was established in connection with the
Company's initial public offering in February, 1999. The members of the
Compensation Committee are Messrs. Solomon (Chairman), Hussey (Vice Chairman)
and Grant. No member of the Compensation Committee is currently or was formerly
an officer or an employee of the Company or its subsidiaries.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
Under the rules of the Commission, the Company is required to provide
certain information concerning compensation provided to the Company's chief
executive officer and its executive officers reported for the year ended
December 31, 1999. The disclosure requirements for the executive officers
include the use of tables and a report of the Committee responsible for
compensation decisions for the named executive officers, explaining the
rationale and considerations that led to those compensation decisions. The
Compensation Committee of the Board of Directors was formed in connection with
the Company's initial public offering in February, 1999. Prior to such time, the
Board was responsible for these decisions.
COMPENSATION COMMITTEE ROLE
The Compensation Committee of the Board of Directors is currently
responsible for the Company's compensation program for its executive officers,
including the named executive officers. The Compensation Committee is
responsible for establishing the compensation of the Company's directors,
officers and other managerial personnel, including salaries, bonuses,
termination arrangements, and other executive officer benefits. The Compensation
Committee is responsible for the administration of both the Company's Long Term
Incentive Plan, including the recipients, amounts and terms of stock option
grants thereunder, and the Non-Qualified Stock Option Plan. Prior to the
formation of the Compensation Committee in connection with
11
<PAGE> 14
the Company's initial public offering in February, 2000, the entire Board of
Directors performed these functions.
COMPENSATION PHILOSOPHY
The compensation philosophy for executive officers conforms generally to
the compensation philosophy followed for all of the Company's employees. The
Company's compensation is designed to maintain executive compensation programs
and policies that enable the Company to attract and retain the services of
highly qualified executives. In addition to base salaries, executive
compensation programs and policies consisting of discretionary cash bonuses and
periodic grants of stock options are designed to reward and provide incentives
for individual contributions as well as overall Company performance.
The Compensation Committee monitors the operation of the Company's
executive compensation policies. Key elements of the Company's compensation
program include base salary, discretionary annual cash bonuses and periodic
grants of stock options. The Company's policies with respect to these elements,
including the basis for the compensation awarded the Company's chief executive
officer, are discussed below. While the elements of compensation described below
are considered separately, the Compensation Committee takes into account the
full compensation package offered by the Company to the individual, including
healthcare and other insurance benefits.
Base Salaries. The Company has established competitive annual base
salaries for all executive officers, including the named executive officers.
Effective as of the initial public offering, the Company entered into employment
agreements with each of its then executive officers. The only executive officer
remaining who has an employment agreement is David K. Meehan. Mr. Meehan's
employment agreement provides for an initial term of three years, subject to
automatic continuation until terminated by either party. See "Executive
Compensation -- Employment Agreements." The annual base salaries for each of the
Company's executive officers, including the Company's chief executive officer,
reflect the subjective judgment of the Board of Directors based on the
consideration of the executive officer's position and tenure with the Company,
the Company's needs, and the executive officer's individual performance,
achievements and contributions to the growth of the Company.
Mr. Meehan served as the Chairman of the Board, President and Chief
Executive Officer of the Company until August, 1999, when he resigned as
President and was replaced in such position by David M. Howard. He subsequently
resigned as the Company's Chief Executive Officer in January, 2000. Mr. Meehan's
annual base salary as the Company's President and Chief Executive Officer was
$258,000. Mr. Howard currently serves as President and Chief Executive Officer
of the Company at an annual base salary of $180,000. The Board of Directors and
Compensation Committee believe that this annual base salary is consistent with
the salary range established for this position based on the factors noted above
and Mr. Howard's prior experience and managerial expertise, his knowledge of the
Company's operations and the industry in which it operates.
Annual Bonus. The Company's executive officers are eligible for a
discretionary annual cash bonus. The amounts of the cash bonuses paid to Mr.
Meehan and Mr. Howard as the Company's Chief Executive Officers for the year
ended December 31, 1999 were $32,000 and $50,000, respectively. The amounts of
these bonuses were determined by the Compensation Committee based upon Mr.
Meehan's and Mr. Howard's respective tenures with the Company, their individual
performance and achievements, and their contributions to the growth of the
Company.
Stock Options. Under the Company's Long Term Incentive Plan, stock options
may be granted to key employees, including executive officers of the Company.
The Long Term Incentive Plan is administered by the Compensation Committee in
accordance with the requirements of Rule 16b-3. The Compensation Committee also
administers the Company's Non-Qualified Stock Option Plan.
During the year ended December 31, 1999, Messrs. Meehan and Howard were
each granted options to purchase 60,000 shares of Common Stock. Mr. Meehan's
options were granted on February 8, 1999 at an exercise price of $11.00 per
share. Subsequent to his resignation as President of the Company in August,
1999,
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<PAGE> 15
he voluntarily forfeited options to purchase 35,000 shares. Mr. Howard's options
were granted on August 14, 1999 at an exercise price of $7.67 per share.
SECTION 162(m) LIMITATIONS
Under Section 162(m) of the Internal Revenue Code, a tax deduction by
corporate taxpayers, such as the Company, is limited with respect to the
compensation of certain executive officers unless such compensation is based
upon performance objectives meeting certain regulatory criteria or is otherwise
excluded from the limitation. Based upon the Compensation Committee's commitment
to link compensation with performance as described in this report, the
Compensation Committee currently intends to qualify compensation paid to the
Company's executive officers for deductibility by the Company under Section
162(m).
COMPENSATION COMMITTEE
E. RAY SOLOMON (CHAIRMAN)
WILLIAM D. HUSSEY (VICE CHAIRMAN)
JOHN A. GRANT, JR.
MARCH 5, 2000
The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934 (together, the "Acts"), except to the extent
that the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
CERTAIN TRANSACTIONS
ADMINISTRATION SERVICES AGREEMENT
Effective as of January 1, 1998, the Company and BIG entered into an
Administrative Services Agreement (the "Administration Agreement") pursuant to
which BIG provides the Company with various administrative and support services,
such as human resources and benefits administration, accounting, legal, cash
management and investment services, requested by the Company from time to time
and reasonably necessary in the conduct of its operations. Under the
Administration Agreement, as originally in effect, the Company was charged for
these services generally based upon a contractually agreed-upon quarterly fee of
$396,250. In addition, the Company paid BIG, through the year ended December 31,
1999, an annual fee of $120,000 for routine legal services provided. Legal
services provided with respect to non-routine matters, such as mergers and
acquisitions and equity or debt offerings, will be billed to the Company at
negotiated prices. The current term of the Administration Agreement expires on
December 31, 2000, but may be renewed by the Company, at its sole option, for an
additional one-year period upon 30 days prior written notice. Thereafter, the
Administration Agreement may be terminated by either party upon 60 days prior
written notice.
Effective as of January 1, 1999, the Administration Agreement was amended
to eliminate certain accounting and internal audit service functions (which
functions are currently performed by the Company directly) and to reduce the
quarterly fee payable by the Company to BIG (including one-fourth of the annual
fee for legal services) to $258,750, subject to renegotiation by either party.
Effective January 1, 2000, the annual fee for routine legal services was
reduced to $60,000 from $120,000. Effective April 1, 2000, the portion of the
quarterly fee attributable to human resources and benefits administration
services (approximately $175,000) was eliminated in its entirety, at such date,
the Company began to perform such services directly.
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<PAGE> 16
SERVICE AGREEMENTS
Effective as of January 1, 1998, the Company entered into a separate
Service Agreement (each a "Service Agreement") with each of BIC, BSIC and FCIC,
all direct or indirect subsidiaries of BIG, pursuant to which the Company
provides policy administration, claims administration and data processing
services to such entities in connection with their flood, homeowners and
automobile lines of business, and claims administration and data processing
services for all such entities' other property and casualty lines of business.
Under the Service Agreements, as originally in effect, each entity paid the
Company as follows: (1) for its policy administration services a monthly fee
based upon direct written premiums for the flood, homeowners and automobile
insurance programs; (2) for its claims administration services a monthly fee
based upon direct earned premiums for the property, casualty, automobile
property, automobile casualty, flood, and workers' compensation insurance
programs (In addition, a monthly fee based upon direct incurred losses is
charged for flood claims administration and a reimbursement not to exceed 5% of
direct incurred losses from a single event in excess of $2 million is charged to
property claims.); (3) for its data processing services, a monthly fee based
upon direct written premiums for all insurance programs; and (4) for certain
customer services such as mailroom, policy assembly, records management and cash
office a monthly fee based upon direct written premiums (except, if provided in
connection with their flood, homeowner and automobile insurance lines, where no
such fees are imposed). The total service fees charged to BIC, BSIC and FCIC
under these Service Agreements during the year ended December 31, 1998 totaled
$36.1 million.
Effective January 1, 1999, these Service Agreements were modified to
provide for tiered pricing based on the volume of business processed, and to
change the fee for data processing services, which was previously charged as a
percentage of direct written premium, to a fixed monthly fee. The total service
fees charged to BIC, BSIC and FCIC under these Service Agreements, as amended,
during the year ended December 31, 1999 totaled $46.5 million. These
modifications resulted in a reduction in the base fees charged for certain lines
of business and increases in base fees charged for other lines of business to
better reflect the services provided and competitive market rates for such
services. The term of each Service Agreement shall expire on June 1, 2001,
provided that it shall thereafter be automatically extended until terminated
upon 90 days prior notice by either party.
Effective April 1, 1999, the Company further amended its existing service
agreements with affiliated insurers to provide for minimum aggregate quarterly
service fee payments through December 31, 1999 with respect to certain lines of
business, provided that certain key tasks are performed timely. If such minimum
service fee requirements with respect to said lines of business under the
agreements had not been implemented as of April 1, 1999, aggregate affiliated
outsourcing services revenues, which totaled $41.5 million for the year ended
December 31, 1999, would have been $39.7 million in accordance with the terms of
the affiliated service agreements as in effect prior to April 1, 1999.
Additionally, for the year ended December 31, 1999, the Company did not
recognize approximately $500,000 of additional affiliated service fees under the
minimum service fee agreement, as the Company did not meet certain specified
milestones on a timely basis. Such minimums were established to compensate the
Company for maintaining an infrastructure to process certain lines of business
of affiliated insurers that have not grown as rapidly as originally forecasted.
In addition, under the Service Agreement with BIC, the Company administers
an AYO Claims Agreement between BIG and Florida Windstorm Underwriting
Association, which agreement BIG assigned to BIC on December 15, 1998. The
Company processes and adjusts all claims made under the AYO Claims Agreement.
The administrative fee (equal to a percentage of each loss paid) is allocated
between BIC and the Company.
Effective December 1, 1998, the Company entered into a service agreement
with BLIC, a subsidiary of BIG, pursuant to which the Company provides certain
administrative services and allows BLIC to make use of certain of the Company's
property, equipment and facilities in connection with BLIC's day-to-day
operations. Under the service agreement, as amended, BLIC agrees to pay the
Company predetermined fees on a quarterly basis. To date, no services have been
provided and no fees have been charged or paid under this service agreement. The
term of the service agreement with BLIC ends on June 1, 2001, but may be
terminated at any time by BLIC upon 90 days prior written notice.
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<PAGE> 17
TECHNICAL SUPPORT SERVICES AGREEMENT
In April, 1999, the Company entered into a Technical Support Services
Agreement with BIG pursuant to which the Company provides BIG with certain
technical support services, computer programming and systems analysis services.
Under this agreement, such services are charged to BIG on a time and materials
basis. Amounts received under this agreement totaled approximately $1.3 million
during the year ended December 31, 1999.
PROPERTY LEASES
The Company currently leases from BIC approximately 76,700 square feet of
office space in St. Petersburg, Florida at a monthly rate of approximately
$78,600. During the year-ended December 31, 1999, the Company paid BIC
approximately $920,000 under this lease. The current term of this lease expires
on December 31, 2001.
The Company currently leases from BIG approximately 7,400 square feet of
office space in St. Petersburg, Florida at a monthly rate of approximately
$7,600. During the year-ended December 31, 1999, the Company paid BIG
approximately $89,000 under this lease. The current term of this lease also
expires on December 31, 2001.
Effective January 1, 1998, BIG assigned to the Company a lease of
approximately 6,600 square feet of office space in St. Petersburg, Florida. This
lease expires on May 31, 2001. The current monthly rental rate under this lease
is approximately $2,700. During the year-ended December 31, 1999, the Company
paid to the third party lessor approximately $77,000 under this lease.
EMPLOYEE LEASING AGREEMENT
Effective as of January 1, 1998, the Company entered into an Employee
Leasing Agreement with BIC (the "Employee Leasing Agreement") pursuant to which
the Company continues to lease various personnel, including customer service
personnel, from BIC. The number of employees leased varies depending on the
needs of the Company and the availability of employees from BIC. The Company is
responsible for all expenses associated with such leased employees, including
salaries, bonuses and benefits. The Company may terminate any leased employee
for disloyalty, misconduct or other similar cause. The Employee Leasing
Agreement is terminable by either the Company or BIC upon 60 days prior notice.
SALES AND ASSIGNMENT AGREEMENT
In May, 1998, the Company entered into a sales and assignment agreement
with BIG and certain affiliated companies whereby certain assets were
transferred and assigned to the Company, effective retroactively to April, 1998,
for use in its business. The assets, including, but not limited to, telephone
equipment, computer hardware and software, and service marks were transferred at
their net book value as of the date of transfer. The Company paid consideration
consisting of $325,075 in cash and entered into two promissory notes amounting
to $2,802,175. The notes were repaid in full in February, 2000 out of the net
proceeds to the Company from its initial public offering. In addition, the
Company assumed the existing leases with unaffiliated third parties relating to
various computer equipment.
SOFTWARE LICENSING AGREEMENT
Effective January 1, 1998, the Company entered into a non-exclusive license
agreement with BIG and BIC pursuant to which the Company licenses its primary
operating systems from BIG and BIC in exchange for a nominal fee. The term of
the license is perpetual. The license agreement provides that the Company shall
be solely responsible for maintaining and upgrading the systems and shall have
the authority to sell or license such systems to third parties.
15
<PAGE> 18
TAX INDEMNITY AGREEMENT
As of July 31, 1998, BIG had sold a sufficient number of shares in the
Company such that the Company will no longer file its tax return with Bankers
International Financial Corporation ("BIFC") on a consolidated basis. Effective
as of July 31, 1998, the Company and BIFC entered into a Tax Indemnity Agreement
pursuant to which (i) BIFC agrees to indemnify the Company in the event the
Company incurs a tax liability as a result of taxable income of BIFC or one of
its subsidiaries, and (ii) the Company agrees to indemnify BIFC in the event
BIFC incurs a tax liability as a result of taxable income of the Company or one
of its subsidiaries. Each party also agrees to reimburse the other for certain
tax credits arising on or before July 31, 1998. Under the Tax Indemnity
Agreement, the parties terminated a previous tax allocation agreement which had
been in effect since October 1, 1993.
GEOTRAC TRANSACTIONS
DJWW Corp., an Ohio corporation, was formed in June, 1987 by Daniel J.
White ("Mr. White"), the corporation's president and sole shareholder. In May,
1991, the corporation changed its name to Geotrac, Inc. In August, 1994,
Geotrac, Inc. sold substantially all of its assets to SMS Geotrac, Inc., a
Delaware corporation ("SMS Geotrac"), for a purchase price of $1,000,000 in
cash, plus a contingent payment based on net profits after taxes for the fiscal
year ended June 30, 1995. SMS Geotrac was a wholly-owned subsidiary of Strategic
Holdings USA, Inc. ("Strategic"). During the year ended June 30, 1996 and on
July 30, 1997, SMS Geotrac made payments of $932,222 and $1,700,000,
respectively, to Mr. White in satisfaction of the contingent payment obligations
under the acquisition agreement. The amounts were recorded as an increase to
goodwill and an additional capital contribution to SMS Geotrac. In connection
with the sale of assets to SMS Geotrac, Mr. White became the president of SMS
Geotrac and received a four-year employment contract at a base salary of
$100,000 per year. In September, 1994, Geotrac, Inc. changed its name to
YoSystems, Inc. During the year ended June 30, 1997, SMS Geotrac and Strategic
agreed to treat all outstanding amounts owed to the parent, $1,611,140, as an
additional capital contribution. In addition, Strategic contributed $500,000 to
SMS Geotrac.
During the one month period ended July 31, 1997, SMS Geotrac advanced
$797,000 to YoSystems, Inc. In July, 1997, YoSystems acquired all of the issued
and outstanding shares of capital stock of SMS Geotrac from Strategic for
$15,000,000 in cash. The purchase price was funded through an $8.75 million loan
from Huntington National Bank to YoSystems ($8.25 million of which was used in
the purchase) plus $6.75 million in cash paid by the Company in connection with
its acquisition of a 49% interest in YoSystems, as described below. The Company
has since assumed the loan from Huntington National Bank, which is payable in
quarterly installments of $312,500 plus interest, with the final installment due
on June 30, 2004.
Neither YoSystems nor Mr. White, its president and sole shareholder, had a
preexisting right to acquire SMS Geotrac pursuant to the August, 1994
transaction. The purchase price of the SMS Geotrac stock was determined by arm's
length negotiations. After the stock purchase transaction, SMS Geotrac merged
into YoSystems, with YoSystems being the surviving entity and changing its name
back to Geotrac, Inc.
Concurrent with the acquisition of SMS Geotrac by YoSystems, the Company,
through a subsidiary, Bankers Hazard Determination Services, Inc. ("BHDS"),
purchased a 49% interest in YoSystems for $6,750,000 in cash. At that time, the
Company did not contemplate acquiring the remaining 51% of YoSystems, Inc.
In connection with the Company's purchase of a 49% interest in YoSystems,
BHDS issued 675,000 shares of non-cumulative 8% preferred stock to Heritage
Hotel Holding Company ("Heritage"), a corporation owned by Richard M. Brubaker,
the half brother of Robert M. Menke, a director of the Company. The preferred
stock of BHDS issued to Heritage had a par value of $10 per share and was
subject to redemption at the option of the board of directors of BHDS. The
preferred stock could be redeemed at any time at a price equal to 108% of the
original consideration paid for the stock by the shareholder plus the amount of
the dividends declared and unpaid on the redemption date. Heritage funded the
preferred stock purchase by entering into a note agreement with a commercial
bank for $6,750,000, with the preferred stock serving as collateral. On May 8,
1998, the Company purchased the outstanding preferred stock of BHDS in exchange
for
16
<PAGE> 19
a note to Heritage in the principal amount of $6,750,000. The note was repaid in
full in February, 2000 out of the net proceeds to the Company from its initial
public offering. After May 8, 1998, the preferred stock of BHDS held by the
Company was exchanged for 675,000 shares of 8.5% cumulative preferred stock of
BHDS. The shares of non-cumulative 8% preferred stock were then retired.
Dividends declared on the preferred stock for 1997 and 1998 were $229,315 and
$189,370, respectively.
In July, 1998, the Company acquired the remaining 51% equity interest in
Geotrac, Inc. (formerly YoSystems) pursuant to the merger of Geotrac, Inc. with
and into BHDS, with the surviving entity being known as "Geotrac of America,
Inc." The Company acquired the remaining 51% interest from Mr. White and his
wife and certain minority shareholders in exchange for (i) 524,198 shares of
Common Stock, (ii) a promissory note in the principal amount of $1,500,000
bearing interest at a rate of 8.5%, and (iii) cash in the amount of $728,069
(paid in December, 1998), for a total purchase price of $7,994,000. In addition,
the Company assumed the loan in the original principal amount of $8,750,000 from
Huntington National Bank made to YoSystems in July, 1997. In connection with
this transaction, Geotrac of America, Inc. entered into an employment agreement
with Mr. White pursuant to which Mr. White serves as the President and Chief
Executive Officer of Geotrac of America, Inc.
In addition, the Company entered into a Corporate Governance Agreement with
Mr. White and Geotrac setting forth certain terms and conditions upon which
Geotrac will operate following the merger. The Corporate Governance Agreement
provides, in part, that, for so long as Mr. White owns stock in the Company or
Geotrac, or has an option to purchase stock in Geotrac, (i) the Company will
vote all of its shares in Geotrac to fix and maintain the number of directors on
the Geotrac Board of Directors at five, (ii) the Company will vote its shares in
Geotrac to elect as directors of Geotrac two persons designated by Mr. White,
(iii) the termination of Mr. White as an employee of Geotrac will require the
vote of four out of five members of the Board of Directors, and (iv) certain
actions by Geotrac will require the unanimous approval of the Geotrac Board of
Directors, including any merger or consolidation, the payment of management or
similar fees to the Company or its subsidiaries and affiliates, the sale or
issuance of Geotrac stock, and the sale of Geotrac assets outside the ordinary
course of business to anyone other than an affiliate of Geotrac. Mr. White also
has a right of first refusal to purchase the assets of Geotrac in the event such
assets are to be sold.
The board of directors of Geotrac of America, Inc. consists of five
members: Robert M. Menke (Chairman), David K. Meehan, David M. Howard, Daniel J.
White and John Payne. Pursuant to his rights under the Corporate Governance
Agreement, Mr. White appointed himself and Mr. Payne to such board. Mr. Howard
is currently an executive officer the Company and the former President of BHDS.
Geotrac currently leases a 12,400 square-foot facility in Norwalk, Ohio
from DanYo LLC, a limited liability company wholly owned by Daniel J. White and
his spouse. This lease is for a term of five years, expiring on August 31, 2000,
and provides for monthly rental payments of approximately $8,717, plus payment
of utilities, real estate taxes and assessments, insurance, repairs and similar
expenses.
MISCELLANEOUS
In February, 2000, Western International Insurance Company, a wholly-owned
subsidiary of Venture Capital Corporation and presently a more than 5%
shareholder of the Company, loaned $12.0 million to BIG in exchange for a
subordinated note. This loan was funded by using a portion of the net proceeds
received by Venture Capital Corporation in the Company's initial public
offering. BIG, in turn, used a portion of such loan proceeds to satisfy a note
payable (including accrued interest) to the Company which totaled $5,322,455.
The balance of the loan proceeds will provide BIG with additional capital to
repay other outstanding indebtedness and expand its operations. The Company, in
turn, used the funds received from BIG, together with a portion of the net
proceeds from its initial public offering, to satisfy $7,054,996 in accounts,
income taxes and notes payable (including accrued interest) payable to BIG.
The Audit Committee of the Board of Directors is responsible for reviewing
all future transactions between the Company and any officer or director of the
Company or any entity in which an officer or director has a material interest.
Any such transactions must be on terms no less favorable than those that could
be obtained on an arm's-length basis from independent third parties.
17
<PAGE> 20
PERFORMANCE GRAPH
The following line graph compares the Company's cumulative total
shareholder return with the cumulative total shareholder return of the S&P 500
Index and the NASDAQ Computer and Data Processing Index since the Company's
initial public offering in February 1999, assuming in each case an initial
investment of $100 on February 11, 1999:
COMPARISON OF TEN-MONTH CUMULATIVE TOTAL RETURN*
AMONG INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.,
THE S&P 500 INDEX AND THE NASDAQ COMPUTER & DATA PROCESSING INDEX
<TABLE>
<CAPTION>
INSURANCE MANAGEMENT NASDAQ COMPUTER &
SOLUTIONS GROUP, INC. S&P 500 DATA PROCESSING
--------------------- ------- -----------------
<S> <C> <C> <C>
2/11/99 100.00 100.00 100.00
3/31/99 81.82 102.69 106.77
6/30/99 77.27 109.93 111.17
9/30/99 27.27 103.07 115.03
12/31/99 22.73 118.41 194.55
</TABLE>
- ---------------
* $100 invested on 2/11/99 in stock or index -- including reinvestment of
dividends. Fiscal year ending December 31.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Grant Thornton LLP as the Company's
independent auditors for the year ending December 31, 2000. A representative of
Grant Thornton LLP will be present at the Annual Meeting. Such representative
will be available to respond to appropriate questions and may make a statement
if he or she so desires.
18
<PAGE> 21
SHAREHOLDER PROPOSALS
The deadline for submission of shareholder proposals pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, as amended ("Rule 14a-8"), for
inclusion in the Company's proxy statement for its 2001 Annual Meeting of
Shareholders is December 10, 2000. After February 23, 2001, notice to the
Company of a shareholder proposal submitted other than pursuant to Rule 14a-8
will be considered untimely, and the persons named in proxies solicited by the
Board of Directors of the Company for the 2001 Annual Meeting of Shareholders
may exercise discretionary voting power with respect to any such proposal.
OTHER MATTERS
Management knows of no matter to be brought before the Annual Meeting which
is not referred to in the Notice of Annual Meeting. If any other matters
properly come before the Annual Meeting, it is intended that the shares
represented by Proxy will be voted with respect thereto in accordance with the
judgment of the persons voting them.
By Order of the Board of Directors,
DAVID K. MEEHAN
Chairman of the Board
19
<PAGE> 22
PROXY
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD ON JUNE 1, 2000
The undersigned shareholder appoints DAVID K. MEEHAN, DAVID M. HOWARD and
CHRISTOPHER P. BREAKIRON, and each of them, as proxy with full power of
substitution, to vote the shares of voting securities of INSURANCE MANAGEMENT
SOLUTIONS GROUP, INC. (the "Company") which the undersigned is entitled to vote
at the Annual Meeting of Shareholders to be held at the offices of the Company,
360 Central Avenue, St. Petersburg, Florida 33701, on Thursday, June 1, 2000, at
10:00 a.m., local time, and at any adjournments thereof, upon matters properly
coming before the meeting, as set forth in the Notice of Annual Meeting and
Proxy Statement, both of which have been received by the undersigned. Without
otherwise limiting the general authorization given hereby, such proxy is
instructed to vote as follows:
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE NOMINEES INDICATED ON THIS CARD AND AS SUCH PROXIES DEEM
ADVISABLE WITH DISCRETIONARY AUTHORITY ON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING AND ANY ADJOURNMENT OR ADJOURNMENTS THEREOF.
PLEASE CHECK THE BOXES BELOW, SIGN, DATE AND RETURN THIS PROXY TO FIRSTAR BANK,
N.A., 1555 NORTH RIVERCENTER DRIVE, SUITE 301, MILWAUKEE, WISCONSIN 53212, IN
THE SELF-ADDRESSED ENVELOPE PROVIDED.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. 2000 ANNUAL MEETING
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
1. ELECTION OF DIRECTORS: 1 -- Robert M. 3 -- E. Ray [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
(Messrs. Menke, Hussey Menke Solomon listed to the to vote for all
and Solomon to serve 2 -- William D. 4 -- David M. left (except as nominees listed to
for a term of three Hussey Howard specified below.) the left.
years and Mr. Howard
to serve for a term of
one year)
</TABLE>
<TABLE>
<S> <C>
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDICATED NOMINEE, WRITE THE NUMBER(S) OF THE NOMINEE(S) IN
THE BOX TO THE RIGHT.) --------------------------------------
</TABLE>
In his discretion, the proxy is authorized to vote upon such other business as
may properly come before the meeting.
Check appropriate
box Date ____________________ NO. OF SHARES
[ ] Name Change? [ ] Address Change?
Indicate changes below:
-----------------------------
-----------------------------
Signature(s) in Box
Please sign exactly as your
name appears hereon. When
signing as attorney, executor,
administrator, trustee or
guardian, please give your
full title. If shares are
jointly held, each holder must
sign. If a corporation, please
sign in full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership
name by an authorized person.
